Insomuch that Bitcoin mining has been profitable to many businesses and has created a lot of jobs, it is obvious that the demand it has placed on electricity production in some countries may be significant. This is the reason why some countries may place restrictions on mining of bitcoins or even increase the taxes mining companies pay.
Bitcoin mining may no longer be as profitable as it used to be in Norway as the country’s lawmakers moved to increase electricity tariff for Bitcoin mining companies citing emission of greenhouse gases.
The legislators hinged their decision on the fact that the industry does not employ many people.
The decision to increase the tariff for Bitcoin miners was met with criticism considering that Norway is one of the countries generating most of its electricity through cleaner green technologies such as hydropower and wind energy.
Astronomical Increase for Bitcoin Mining Companies
The astronomical increase in tariff which took effect in January of 2019 made bitcoin miners bills of 0.48 Øre shoot up 16.58 Øre. A situation possibly moved mining investments to other countries.
The policy was criticized because many of the countries that have the most miners such China are known to depend on fossil fuel for power generation.
Mining Increases Greenhouse Emission
When countries like Norway, depending on green energy, place restrictions on the cryptocurrency mining industry, it invariably leads to migration of these mining companies to countries that use less green energy production methods.
The reason some countries are not interested in encouraging mining of cryptocurrencies is that they are of the opinion that the Bitcoin mining industry does not contribute considerably to the employment market since mines do not need many employees.
Nevertheless, it is important that if the emission of Greenhouse gases are to be curtailed, that countries that their sources of energy are cleaner be the host of most mining companies instead of those that depend on fossil fuels.
Reacting to the news that a country like Norway placed restrictions through higher tariffs, CCN publisher Jonas Borchgrevink, who is Norwegian released a statement, in which he wrote,
“Norway is one of the greenest nations on earth when it comes to the production of electricity. 99 percent of the electricity is produced by hydropower, and we continue to expand with wind power-, offshore wind power-, solar energy- and bio-energy facilities. From January 2018 to October 31st 2018, we exported 15 071 492 MWh, imported 6 321 079 MWh with a total “net profit” of 8 750 413 MWh. We are in excess of green energy.”
Bitcoin – A Dirty Form of Cryptographic Output
While speaking to a news outlet Aftenposten.no, Lars Haltbrekken a parliamentary representative told the media that,
“Norway cannot continue to provide huge tax incentives for the most dirty form of cryptographic output as bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
Condemning the policy, Jonas Borchgrevink said that it made no sense that a green energy country such as Norway would embark on a policy that would indirectly encourage the emission of greenhouse gases by making it difficult for miners to operate from the country.
Borchgrevink said that the policy smacks of hypocrisy and urged the legislators to instead enact laws that would discourage or shut down Norwegian oil companies producing billions of barrels in offshore crude.
“Why don’t we shut down the offshore oil production that pumps up more than 1.6 million barrels per day? Parliament is hypocritical.
Look at this quote from norskpetroleum.no:
Total production rose in 2017 for the fourth consecutive year, and gas sales were at a record high. Never before has so much gas been sold from the Norwegian shelf as was the case in 2017. In the next few years, total production is expected to remain high.”
High Energy Cryptographic Mining Has Come to Stay
An eminent economist Roger Schjerva said that the policy is effectively going to cost many municipalities in jobs and tax revenues because the parliamentarians do not understand that cryptocurrency mining has come to stay as a segment of an industry we will be living with far into the future.
Gjermund Hagesæter, a spokesperson for Kryptovault, one of the prominent crypto-service companies in Norway reacting to the news said,
“If this is correct, it will be a complete disaster for the cryptocurrency industry in Norway. This gives a terrible signal to foreigners that are thinking of investing in Norway.”
Some analysts believe that the move was aimed at raising funds to balance the budget by taking advantage of an emerging sector. It seems that the Norwegian mining industry has been made the scapegoat for the budget with the hope that the miners will take the increase in electricity tariff in stride.
China, the country where most bitcoins are mined, is still generating most of its energy from coal which produces a massive volume of greenhouse gases that has been identified as the main culprit for greenhouse effects such as depletion of ozone layer.
Little Effect On Global Mining For Bitcoin
A Bitnodes report shows that there are just 40 Bitcoin nodes operate from the country. Although there are many people using the premier cryptocurrency mining interchangeably with other mining operations because they think that every miner is mining bitcoin. The data implies that the mining operations in Norway do not number in their thousands.
The policy may not have any effects on the global mining operation for Bitcoin, however its effect on the perception of Norway as a mining haven will definitely change.
The Scandinavian and North Atlantic countries such as Iceland have been deemed mining friendly but with the recent policy summersault from Norway, mining companies will think twice before moving to the country in view of many others with more friendly policies.
Tough Policy For Norwegian Miners
Is bitcoin mining worth it for the Norwegians? Northern Bitcoin, a mining company operating in the country, was quoted by Forbes as saying that it costs $7,700 to mine one bitcoin in Norway. If this figure is accurate, it means that with the price of Bitcoin at less than $5000, miners in the country are already operating at losses.
The new policy will make it even tougher to operate from the country. Although the profitability of mining operations depends on a number of factors such as the size of the mine, the larger mines with many miners will break even quicker because they are able to mine more blocks.
This is the reason mining operations are pooling their resources together to form mining pools thereby standing more chance of mining the bitcoin blocks in a process that has been described as very competitive.
The mining difficulty of Bitcoin increases over time. Miners need greater incentives to remain in business, incentives which some countries have given willingly to encourage the new technology. Others are not willing to make that concession and may even move against mining if it’s a coin toss.